1. Background to Tendering for NHS Services
Tim Parsons
Business Adviser

2. Outline for this evening
Background to tendering – when, why etc
The process involved
What are PCOs looking for?
Pricing your services and understanding costs
Putting together a good case

3. When PCOs tender When practices are sold When practices go private
Patient Charge Revenue
When dental budget increases (9% increase in 2008/09)
Capital budgets
Budget has to be spent!

4. Why PCOs will tender Achieve particular outcomes:
Improve oral health for a particular group or within a particular locality
Improve access for a particular group
Use a new form of GDS contract/PDS agreement
Establish a new practice in a particular location

5. Why PCOs will tender Legal/governance reasons:
The NHS is not legally required to put dental services out to tender but
A PCO’s Standing Financial Instructions will have a term that says that medical services above £x should be tendered although the Board/PCO CEO/Chair may override this
Recent EU ruling muddying the waters

6. Why PCOs tender Transparency:
Provide fairness and help protect the PCO from legal action
Sets clear quality criteria
Puts the provision of dental services on a commercial footing

7. Why PCOs will tender Promote competition: Create a market
Increase value for money
Improve quality by providing a specification and preventing providers that do not reach the minimum quality requirements from tendering
Most importantly it is now the norm for PCOs

8. Who is going to tender?
Large corporate bodies with managers whose job is to win new business
Associates wanting to have their own practice
Established commercially focussed practices wanting to expand
New providers, for example not for profit organisations and medical corporate bodies
And the people sitting around you now!

9. NHS tendering process must ensure.
Fair competition and that no potential supplier is disadvantaged by the process
Contract decision is based on evaluation criteria linked to specification requirements
Specification must include all technical and professional requirements
Award notice is placed in the OJEU

10. Restricted tendering Advertisement for expressions of interest
There may be an information event to explain the process and answer question
Screening against pre-qualification questionnaire to obtain a shortlist
Short listed providers (normally four to eight) given full tender documents and invited to submit a tender
Short-listed providers invited to interview

11. Open tendering
Advertisements appear and providers invited to apply for tender documents
Applicants submit full tenders
Award is made or shortlisting occurs and an interview process is held
May be used for awarding capital grants

12. Negotiation More rarely used
PCO draws up a list of preferred providers using a tendering process
Negotiates contracts with providers who wish to take part, there may be another tendering process if only one contract is to be awarded

13. Components of the tendering process: Example quality criteria
A track record in the provision of primary care dental services under GDS or PDS
Provide evidence of the following: eligibility to hold a GDS contract/PDS agreement and entitlement to carry on a business in the UK
For specialist services, specialist qualifications
A reference from an NHS commissioner, no breach or remedial notices issued
On target with current contracts

14. Components of the tendering process: Example quality criteria (cont’d)
More than one dentist within the practice
Experience of setting up a brand new dental practice
Experience of recruiting, inducting and supporting dentists and dental care professionals
Ability to implement the new service within the minimum timescales
Clinical governance systems IT

15. Components of the tendering process: Service specification might contain
Amount of UDAs to be provided
Contract value available
Oral health outcomes expected
Clinical processes for example fluoride varnishes, diet advice
Practice location for a new practice
Commencement date
Clinical governance system

16. Components of the tendering process: Service specification might contain (cont’d)
Business continuity plan
Opening hours
Number of patients to be seen
Identification of performers
Patient involvement and patient satisfaction
Ensuring equality and diversity IT

17. Contract that is offered
May not be the standard GDS contract/PDS agreement
May contain specific additional conditions such as access sessions, opening hours from 8am to 18.30pm, provision for efficiency savings
May be fixed term but could be a rolling PDS

18. Components of the tendering process: Evaluation
Panel will evaluate offers according to written criteria that tie in with the specification
Mark scheme may be given
Panel members will be identified and will include a financial, commissioning and public health representation
Economic criteria may include price, quality, delivery performance, risk and overall cost effectiveness

19. Components of the tendering process: Interviews
Where there is restricted tendering short listed providers may be asked to submit a draft proposal
Interviews by the Panel with detailed and possibly difficult questions
May have to make a presentation of minutes

20. What are PCOs looking for?
Value for money innovation
Certainty of supply
Good relationships
Evidence based practice
Practice organisation tailored to patient need

21. Final Legal Issues
Freedom of Information Act applies PCO should have a policy on FOIA and tenders
Competition Law and price fixing. Suppliers must not share information about prices and LDCs must not pass on information
Suppliers cannot act together to prevent, restrict or distort competition
TUPE if UDAs are tendered which previously belonged to a practice with employees, these employees may have the right to transfer to the winner of the tendering process under TUPE: take advice from the BDA

22. Pricing your Services

23. Firstly… Be realistic when tendering! Can you: Deliver UDAs On time
Whilst making a profit

24. Overheads, Breakeven and Price Setting
The Basic Financial Statements
Overheads and Costs
Fixed and Variable, Direct and Indirect
Breaking Even
The impact of changing costs and overheads
The impact of changing contract values
How to decide what your price is

25. The Basic Financial Statements
Rank the following in terms of day to day running of a small business:
Balance Sheet
Cashflow Statement
Profit & Loss Account

26. The Basic Financial Statements
And the answer is:
Cashflow Statement
Profit & Loss Account
Balance Sheet

27. Cashflow Statement
“A statement that shows the sources and uses of cash for a period”
In short, the statement that shows you whether you have access to real funds and whether you are living within your means

28. Cashflow Statement Net cash inflows from operating activities 55
£ £
Net cash inflows from operating activities
Returns on investments and servicing of finance
Interest received
Interest paid (2)
Net cash outflow (1)
Taxation
Corporation tax paid (4)
Net cash outflow (4)
Capital expenditure
Payments to acquire intangible fixed assets (6)
Payments to acquire tangible fixed assets (23)
Receipts from sales of tangible fixed assets
Net cash outflow (25)
Etc., etc.,etc.,
Increase in cash

29. Profit & Loss Account
“A financial statement that measures and reports the profit (or loss) the business has generated during a period. It is derived by deducting from the total revenues for a period, the total expenses associated with those revenues”
A tool to help you understand what your earnings are and what it is costing you to generate them. Something you can work with

30. Profit & Loss Account Turnover 126,000 Less Cost of Sales 68,000
£ £
Turnover ,000
Less Cost of Sales ,000
Gross Profit ,000
Less Distribution Costs 10,000
Administrative Expenses 8, ,000
40,000
Other operating income ,000
Operating Profit ,000
Interest receivable and similar income ,800
57,800
Less Interest payable and similar charges ,600
Profit on ordinary activities before taxation ,200
Less Tax on profit on ordinary activities ,600
Profit on ordinary activities after taxation ,600

31. Balance Sheet
“A statement of financial position that shows the assets of a business and the claims on those assets”
Shows who has contributed what to the business and how the investments have been distributed – and importantly the value of the business at a given point in time

32. Balance Sheet £ £ £ Fixed Assets Capital
£ £ £
Fixed Assets Capital
Freehold premises 45,000 Opening Balance 50,000
Plant and Machinery 30,000 Add Profit ,000
Motor Vehicles , ,000
94,000 Less Drawings (4,000)
60,000
Long-Term Liabilities
Loan 50,000
Current Assets Current Liabilities
Stock-in-trade 23,000 Trade Creditors 37,000
Trade Debtors 18,000
Cash at Bank 12,000
53, , ,000

33. Overheads and Costs
Fixed cost – “A cost that stays the same when changes occur in volumes of activity”
Variable cost – “A cost that varies according to volume of activity”
Direct costs – “Costs that can be identified with specific cost units, to the extent that the cost can be measured in respect of each particular unit of output”
Indirect costs – “All costs except direct costs, i.e. all those that cannot be measured in respect of each particular unit of output” - OVERHEADS

34. Overheads and Costs Fixed cost – e.g. Property, Rent
Variable cost – “A cost that varies according to volume of activity”
Direct costs – “Costs that can be identified with specific cost units, to the extent that the cost can be measured in respect of each particular unit of output”
Indirect costs – “All costs except direct costs, i.e. all those that cannot be measured in respect of each particular unit of output”

35. Overheads and Costs Fixed cost – e.g. Property Rent
Variable cost – e.g. Electricity, Phone Bills
Direct costs – “Costs that can be identified with specific cost units, to the extent that the cost can be measured in respect of each particular unit of output”
Indirect costs – “All costs except direct costs, i.e. all those that cannot be measured in respect of each particular unit of output”

36. Overheads and Costs Fixed cost – e.g. Property Rent
Variable cost – e.g. Electricity / Phone Bills
Direct costs – e.g. Consumable Materials
Indirect costs – “All costs except direct costs, i.e. all those that cannot be measured in respect of each particular unit of output”

37. Overheads and Costs Fixed cost – e.g. Property Rent
Variable cost – e.g. Electricity / Phone Bills
Direct costs – e.g. Consumable Materials
Indirect costs – e.g. Utilities, Depreciation Charges etc.

38. The Relationship Between Costs and Overheads
Fixed costs
Variable costs
Indirect costs
TOTAL OR FULL COST OF A PARTICULAR JOB
Direct costs

39. Fixed Costs

40. Variable Costs

41. Incremental Income

42. Break Even Point

43. More Expensive Materials
Break Even Point Moves Up
Variable Costs Move Up
Fixed Costs remain the same

44. New Equipment Cost of Production Moves Up Break Even Point Moves Up
Fixed Cost Base Moves Up

45. Fixed Price Contracts

46. Fixed Price Contracts (UDA) Value Increases

47. Fixed Price Contracts (UDA) Value Increases
Profit improves
Break even point comes earlier

48. Fixed Price Contracts (UDA) Value Decreases

49. Fixed Price Contracts (UDA) Value Decreases
Profit reduces
Break even point takes longer to achieve

50. How to decide what your price should be
Relating the price to your running costs
Relating the price to your earning expectations
Relating the price to how hard you want to work
Relating the price to how long you want to work
Relating the price to what the market will stand

51. How to decide what your price should be
So what do you do?
Gather information
Allocate expenses
Express preferences
Relate realities to desires
Factor-in downtime
Factor-in lower value time
Review the price produced
Iterate!

52. General process Advert Reply PQQ
ITT - Business Plan/Further information
Panel Presentation and Questions
Decision
Win - hard work starts from here!

53. READ THE DOCUMENTATION CAREFULLY

54. When looking at tender docs
What is the length of the contract?
What services are they asking for?
What is the timescale for opening?
Where do they want services to be provided?
Are there any penalties built into contract?
£/UDA
Who will patients be – where will they come from?

55. Consider:
Does it make economic sense given the contract conditions and oral health of the population?
Can you compete on price and how will this effect profits given that quality criteria must be met?
What are the contract terms are they more onerous than the present standard GDS contract?
Is it a useful exercise to go through to establish a practice in the NHS market?
Can you form a corporate consortium with other practices?

56. Detail Research: Go visit area – Ferrari or Fiesta? Use internet
Get costings:
Staff
Property
Potential for private practice
Would you want to live/work there
Area on up?
How many dentists in area?

57. Detail Take time over documentation! Time shows, rush shows
Ensure all formatted correctly
Easy to read?
Friends/family to check (not partner!)
Deadline is exactly that!
Have you answered all the points?
Use photos/maps/appendices
Contents = actual titles
KISS

58. PCOs also like… Quality awards (e.g. IIP, BDA Good Practice Scheme)
Early/late opening hours
Weekend opening
Access for all
Wide skill mix within dental team
Experience in setting up/running of practices
Contingency plans
High NHS mix
NHS branding
Low staff turnover
Innovative ideas

59. Business Case – Responding to ITT
Title page
Contents page
Business case
Appendices

60. Title Page Title Include PCO and Business name
Contact details - address, telephone, , website
Who proposal is written for
Logos?
Don’t overcomplicate

61. Contents page Leave until last Ensure accurate page numbering
Just main headings – not all subtitles

62. Business Case Overview of tender application
Current practice situation
Proposed solution
Financial requirements
Implementation schedule

63. Business Case - Overview
Reason behind proposal
Breakdown of oral heath need
Key PCO drivers
Key PCO criteria

64. Business Case - Practice Situation
Experience of Management Team
Type of dentistry
Number and location of practices/surgeries
Number of dentists, DCPs and other staff
Ownership Structure
Patient base
UDAs delivered annually (and on target?)
Additional services currently delivered
Explain Unique Selling Points (USPs)
How long established? Did you set up?
Awards – BDA Good Practice Scheme?

65. Business Case - Proposed Services
What are you offering to undertake
- Details of services (e.g. full mandatory NHS dental services)
- How much – X UDAs
How will services be marketed
Relate back to oral health of population
Benefits of solution and USPs
Demonstrate that tender priorities have been met
Demonstrate commitment to NHS
Demonstrate quality service provision and clinical governance
Innovative ideas
Quote information back at them
SELL YOUR CONCEPT

66. Business Case - Financial Requirements
Detail total contract value and how this will be broken down for expenses
Detail investment into practice
Capital Funding
- Don’t assume you are going to be awarded
- Show improvements if won
Don’t show profit
Ensure that income will sustain business though

67. Business Case - Implementation Schedule
Outline timescales for implementation, including:
- Acquisition of premises
- Planning permission
- Renovation and instillation of equipment
- Marketing
- Recruitment
Steps taken to speed up implementation
Timeline
Requirements from PCO
Day one date
Be realistic

68. Business Case - Summary
Review benefits
Stress experience
Emphasise USPs
Demonstrate ability to meet PCO’s requirements
Show commitment
Demonstrate desire to fulfil contract

69. Business Case – Appendices
Maps
Photos
CVs
Policies
Marketing material
Letters/references from PCOs
Any other information required from PCO

70. Implementation Ensure requirements are met
Deliver what you said you are going to deliver
Communicate with PCO at all times:
- Problems
- Successes
- Innovations
- Key milestones
- Marketing
Keep good relationship with PCO – repeat business?
Request feedback from PCO

71. A blatant plug… BDA Tender Training Workshops £550+VAT for BDA members
2 day workshop
Held in association with Henry Schein
5/6 June

72. Thank you for listening
Any questions?
Tim Parsons